The value of rights owned by the Queen’s property company to exploit the seabed around Britain’s coastline has swelled to £5bn after a record-breaking auction of plots for offshore windfarms.
Profits for the crown estate, which generates money for the Treasury and the royal family, jumped by £43.4m to £312.7m in the year to the end of March.
The total value of its portfolio, which includes swathes of the seabed around Britain and property on Regent Street, London, has increased by 8.3% to £15.6bn.
The estate’s first auction of its seabed licences in a decade helped to drive up the value of the portfolio.
The estate awarded licences for six offshore windfarms off the coast of England and Wales, which could generate up to £9bn over the next 10 years. The successful bidders included Germany’s RWE Renewables, which won two licences at Dogger Bank, off the Yorkshire coast, and two from a consortium which includes the oil company BP, which is also investing in renewable energy.
The government has yet to approve any of the projects. However, independent valuations of their potential income pushed up the value of the crown estate’s marine business by 22% on last year to £5bn. It is hoped the windfarms will be able to power 7m homes.
The crown estate hands all of its profits to the Treasury before 25% is returned to the royal household in the form of the sovereign grant – a funding formula that is currently under government review. The sovereign grant was increased in 2017, from its previous level of 15%, to pay for extensive renovations at Buckingham Palace.
The funding arrangement dates back to 1760, when George III reached an agreement to surrender his income from the crown estate in return for an annual fixed payment, now called the sovereign grant.
The Queen is not liable for tax on the sovereign grant but voluntarily pays tax on her private income from land owned by the Duchy of Lancaster and property she owns personally.
The £312.7m profit represents a significant bounceback on last year, aided by a step up in rent collection and an increase in offshore wind capacity, notably from the Triton Knoll windfarm, off the Lincolnshire coast, and Hornsea 2, off Yorkshire. But profits still fell short of the £345m raked in before the pandemic, which punctured the value of central London property.
The crown is on a drive to boost its income from the licensing of renewable energy projects such as static windfarms in shallow waters, carbon capture storage, and floating windfarm leasing. It hopes a floating windfarm planned for the Celtic Sea could generate up to 4 gigawatts of power.
The value of its London portfolio was flat at £7.7bn, underperforming its investment benchmark.
The crown estate’s finance chief, Robert Allen, said: “We’ve all got a job getting London back on its feet, frankly … we’ve got a lot of confidence in the long-term future of Regent Street.” He said footfall to its shops and restaurants was 38% of pre-pandemic levels last year.
Dan Labbad, chief executive of the crown estate, added: “In London, we have played a role in its renewal and regeneration over centuries and we’re now focused on supporting the capital post-pandemic in retaining its status as a global city.”
The company said overall returns from its investments had outperformed a bespoke benchmark and it had generated more than £3bn for public spending over the last decade.
Labbad said: “We’re clear that our role is to work towards supporting the nation to address some of the economic, social and environmental challenges and opportunities that we face alongside delivering a strong return to the public purse.”
The company also owns 191,000 acres of land including Windsor Park, in Berkshire, where profits nudged up by £1m to £18m as visitor numbers bounced back from the pandemic.
Allen said the crown estate planned to invest between £500m and £1bn over the next decade in modernising its property estate and in improving its buildings’ energy efficiency.